The statements of Federal Reserve Chairman Powell at the much-noticed central bank symposium in Jackson Hole shook stock markets only very briefly at the end of last week, and investors continued to be in a buying mood at the beginning of the week. In this context, the reduction of the stamp duty on stock transactions announced in China was a positive driver and the latent interest rate worries seem to have receded into the background, at least temporarily. However, the focus is likely to turn back to US monetary policy soon, especially with the labour market report due at the end of this week.
On the New York Stock Exchange, stock indices continued their recent recovery and posted gains across the board on Monday. The Dow Jones Industrial closed at 34,559.98 points 0.6% higher than the previous day. The broad S&P 500 also gained 0.6% and ended the week's opening trading at 4433.31 points. On the Nasdaq technology exchange, the indices gained about 0.8%. After Fed Chairman Jerome Powell recently emphasized that the further direction of monetary policy would be made dependent on the development of economic indicators, investors are now likely to focus on the labor market report from Washington, which is due on Friday. Meanwhile, on the bond market, the yield on ten-year US government bonds fell to 4.21%.
Investors are hopeful regarding the smoldering trade dispute between the United States and China. Thus, Washington and Beijing have agreed on the establishment of a new working group, which is to meet twice a year from the beginning of 2024. However, US Commerce Secretary Gina Raimondo also spoke of a "complicated" and "challenging" relationship between the two countries.
Asia-Pacific markets were up across the board Tuesday. In Tokyo, the Nikkei 225 rose 0.2%, while South Korea's Kospi was 0.3% higher and the Kosdaq 0.6% higher. In Hong Kong, the Hang Seng Index extended gains to close 1.8% higher, while mainland China's CSI 300 added 0.7%.
On Europe's stock exchanges, the main indices extended their gains yesterday. The benchmark EuroStoxx 50 index closed 1.3% higher at 4291.07 points on Monday. In the European sector comparison, there were only winners at the beginning of the week. The best performance was in the technology sector. Meanwhile, latest data from the European Central Bank (ECB) showed that sluggish economic growth in the euro area is increasingly affecting money supply growth. According to the report, broad money supply M3 fell in July for the first time since 2010. Over the year, the decline amounted to 0.4%. The narrower M1 money supply has already been declining for some time, falling by 9.2% year-on-year in July.
Corporate news in focus: HP Inc. Q3 figures.
Economic data in focus: Germany GfK consumer confidence September (08:00 am), Sweden GDP Q2 (08:00 am), France consumer confidence August (08:45 am), Hungary Central Bank, interest rate decision (02.00 pm), and out of the US, the FHFA index June (03:00 pm) and consumer confidence August (04:00 pm).
All about global economic and market trends at a glance
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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
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Reference regarding valuation rates
Unless otherwise stated or specified, the rates used in the analysis are normally the share prices provided by the news agencies Reuters and/or Bloomberg at the close of the stock exchange of the domestic market of the analyzed security or the relevant principal market of this security on the respective local stock exchange on the eve of the day of compilation.
Explanation of investment recommendations for stocks
We apply a “hybrid approach” (internal fundamental analysis combined with “theScreener”, an external, purely quantitative analysis tool). TheScreener is based on purely quantitative, i.e. computable variables such as (but not exclusively restricted to) profit adjustments of the past few weeks, stock valuation in relation to historical performance and comparison groups, the technical trend, performance in relation to the market etc. The assessment of the equity analysts, which is largely based on a qualitative analysis, does not need to match with the one of theScreener. For the overall judgement the assessment of the equity analysts overrides the one of theScreener. LGT Bank (Switzerland) Ltd. categorizes its analysis recommendations into five ratings: for a “Buy” recommendation we expect a relative outperformance compared with the sector. Only equities subjected to an internal fundamental analysis can be rated “Buy”. The recommendation “Attractive” is used for equities exclusively ranked by theScreener without any internal fundamental analysis as “slightly positive” or “positive”. A moderate relative outperformance versus the index is expected. For equities that we rate as “Hold” we expect a performance largely in line with the one of the sector. This can comprise both equities for which a fundamental analysis has been carried out as well as equities that theScreener ranks as “neutral” versus the index. The recommendation “Unattractive” is used for equities exclusively ranked by theScreener without any internal fundamental analysis as “slightly negative”. A moderate relative underperformance versus the index is expected. By contrast, “Sell” recommendations are based on the expectation of a relative underperformance compared with the sector. This can comprise both equities for which we are recommending “Sell” for fundamental reasons as well as equities that theScreener ranks as “negative” versus the index. Therefore the ratings always reflect a relative consideration versus the sector and/or specified index. The risk assessment is based on the individual judgement of the analyst (e.g. we assume a “high” risk for illiquid shares, highly indebted companies or shares from developing countries).
Reference regarding share valuation basis: The analysis compiled by LGT Bank (Switzerland) Ltd. are essentially based on secondary research relating to fundamental and quantitative analysis. Generally accepted valuation methods (valuation multiples, return figures, sector comparisons, comparisons with past valuations etc.) are used for this. The forecasts for the quantitative analysis are prepared with the help of mathematical-statistical procedures (see statements above concerning the analysis tool “theScreener”). Economic indicators such as interest rates, currencies, commodity prices and assumptions relating to the economy are included in the overall assessment. The mood of the market also affects the company valuation. Moreover, many of the approaches are based on estimates and expectations that may change quickly and without warning, depending on developments specific to the industry. Therefore, the recommendations derived from the analysis can also change accordingly. The investment judgements generally refer to a period of 6 to 12 months. However, they are also subject to market conditions and represent a snapshot of the situation. They may be achieved more quickly or more slowly or be revised upwards or downwards.
Explanation of investment recommendations for bonds
We employ both qualitative and quantitative methods to derive our recommendations, which are to be seen as relative to sector/quality peers among comparable maturities. “Buy” and “Sell” recommendations demand a qualitative in-house analyst opinion, in which we incorporate both historical and projected financial results and credit metrics as well as past and anticipated company and sector-specific observations and trends. We recommend “Buy” for a security for which we expect a strong relative outperformance compared to sector/quality peers among comparable maturities. We recommend “Sell” if we expect strong relative underperformance compared to sector/quality peers among comparable maturities. The ratings “Attractive”, “Hold” and “Unattractive” can be based purely on a quantitative approach, which includes the market price of credit risk, valuation of equities and associated instruments, corporate leverage, liability structure, size, and agency rating. We recommend “Attractive” for a security for which we expect a relative outperformance compared to sector/quality peers among comparable maturities. We recommend “Hold” if we expect an average performance compared to sector/quality peers among comparable maturities. We recommend “Unattractive” if we expect a relative underperformance compared to sector/quality peers among comparable maturities.
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Definition of rating categories of S&P and Moody’s which are relevant for us:
AAA/Aaa: Borrower with highest credit quality. Default risk also virtually negligible over the longer term
AA/Aa: Safe investment, default risk virtually negligible but more difficult to assess in the longer term
A: Safe investment as long as no unforeseen events impair the overall economy or sector
BBB/Baa: Average investment. However, problems must be expected if the overall economy deteriorates
BB/Ba: Speculative investment. Defaults must be expected if the economic situation deteriorates
B: Highly speculative investment. Defaults are likely if the economic situation deteriorates
For more information on our methodology for bonds, please contact your LGT relationship manager or your local LGT Group company.
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This recommendation was prepared by LGT and not by an independent financial analysis department. Therefore this recommendation does not meet all the statutory requirements for guaranteeing the impartiality of financial research. The Swiss Bankers Association Directives on the Independence of Financial Research do not apply to this recommendation. Investments in structured products entail a wide range of risks. Investment decisions should therefore only be made on the basis of the valid prospectus or complete documentation following consultation with an expert. This does not constitute financial analysis within the meaning of the Liechtenstein Ordinance on the Preparation of Financial Analysis according to the Law against Market Abuse in the Trading of Financial Instruments.
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